U.S. Farmers Struggling
Some key takeaways from a recent article in Barrons titled, “U.S. Farmers Are Struggling. They Will Lose More in a Trade War, [according to Dan Basse, CEO of AgResource].”
1. Declining U.S. Agricultural Dominance:
• U.S. share in global agricultural trade dropped from 62% in 1979 to 11% today and the trade deficit is at a record $42 billion.
• Brazil now leads in soybean and corn exports, surpassing the U.S.
2. Impact of Geopolitical Shifts and Trade Wars:
• The divide between G-7 countries and BRIC nations is altering trade patterns at the expense of U.S. farmers.
• China's pivot away from U.S. agricultural imports benefits Russia, Brazil, and Argentina.
• Potential retaliation from U.S. import tariffs on China, Mexico, Canada, and other trade partners.
3. Economic Pressures on Farmers:
• Corn and soybean production costs are below current futures prices. “Net farm income has dropped by 31% since 2022, marking the largest two-year decline on record.”
• High fertilizer and seed costs, further squeeze farmer profits. Fertilizer costs continue to be affected by a volatile global supply chain and energy market. Additionally, 30% of U.S. farmers rent their land.
• USDA data reports that 85 cents of every farm dollar goes to the middlemen (processing, packaging, and transportation).
• Beef producers benefit from record-high prices ($8.50/lb), partially supported by innovations in dairy-beef crossbreeding; “The first time the dairy industry is helping the beef industry get additional supply.”
Space Testing vs
Soil Testing
4. Future of U.S. Agriculture:
• Enhanced understanding of soil and soil fertility should be a critical focus, leading to my favorite quote from the article:
“As I watch Elon Musk land spaceships, I think, we know more about what is 200 miles above our heads than what is two feet under our shoes.”
Well said Dan!
#fertilizer #AgResource
(Source: “U.S. Farmers Are Struggling. They Will Lose More in a Trade War, This Ag Expert Says”, Debbie Carlson, Barrons, 28 Nov 2024)
Tariffs are All the Rage
On the 21st of November, EU Trade Ministers met to mull additional tariffs for agricultural and fertilizers from Russia and Belarus into the EU. This certainly has raised some questions over practical implementation and whether the current sanctions are serving their intended purposes.
The U.S. Department of Commerce has set countervailing duty (CVD) rates on phosphate fertilizers from Morocco (16.81%) and Russia (17.20%) to assist U.S. phosphate producers. For ammonium sulphate from China, rates are even more penal: antidumping duty (AD) of 493.46% and countervailing duty (CVD) rate of 206.72% (federalregister.gov).
In 2018, China cut the NPK export tax from 20% to 100 Yuan/metric ton and then in 2019, they waived the export tax all-together on many fertilizers including NPKs. NPK exports predictably soared (over 700% in 2018).
Export Taxes - Effective?
The reduction in 2018 and subsequent removal in 2019 of the China Export Tax on selected fertilizers had significant effects on exports.
Tariffs are a very complex issue. One can trace each step of the fertilizer supply chain from the mine, processing, importation, re-processing, packaging, shipping, distribution, retailing and finally to the end farmer applying in the field.
People working at every stage in the supply chain will have differing opinions. But honestly, I haven’t met too many farmers wanting to pay more for higher farm input prices. There is certainly ardent debate on both sides of the tariff issue. In general, they are protectionist measures in one way or another.
The Thai agricultural fertilizer market has no import tariffs on most chemical fertilizers, which makes for an interesting case study. Are tariffs achieving their goals of protecting domestic producers and ensuring market fairness, or are they creating unintended consequences across global supply chains?"
Maybe that should be 'All the Rage' !